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UK digital bank Starling could fetch a valuation of close to £10bn within the next few years as it rolls out its banking software globally for lucrative fees, according to one of its top investors.
Investment trust Chrysalis, Starling’s second-largest backer, told the Financial Times that the app-based lender could turbocharge its revenue by licensing its “Engine” service — software that allows companies to launch their own digital banking products.
“We’ve been pushing for Engine to be developed to drive Starling’s growth, as this proposition opens up a global market for bank infrastructure,” said Richard Watts, co-manager of Chrysalis.
He said although Starling’s customer deposits and loans continued to rise, the expansion of Engine “could see a valuation approaching £10bn” for the lender.
Starling was founded by Anne Boden in 2014 as a digital bank providing retail current accounts, before expanding into business lending and mortgages.
The lender last year signed Salt Bank in Romania and AMP Bank in Australia as its first two Engine clients.
But Watts reckons Engine has “a strong pipeline” of customers and noted that the market was “very significant” for growth.
“We think Engine could grow to 40-50 clients over the next few years, which could equate to a revenue opportunity of many hundreds of millions of pounds per annum,” he said.
However, there are some questions over Engine’s growth potential given that the so-called “banking as a service” platform has not won contracts to partner with big lenders.
Starling came under the spotlight last year following a dispute with investors over its valuation.
Boden, who stepped down last year, clashed with investors over fund manager Jupiter’s decision to sell its holding at a price that cut Starling’s valuation from £2.5bn to £1bn-£1.5bn, according to people familiar with the situation.
The bank is seeking to list the business, but has not given a timeline. It generated a pre-tax profit of £195mn in 2023, six times higher than the previous year, while revenues rose to £453mn from £216mn.
Declan Ferguson, chief financial officer, said the company was “extremely excited” about the software part of the business “as it offers enormous international potential for us to bring the best of British technology to banks around the world”.
The fintech has hired Raman Bhatia, head of energy supplier Ovo, to become its new chief executive. Bhatia, a former head of HSBC’s digital bank in the UK and Europe, is set to start in the summer.
